Changes needed to Pakistan cement tariffs and tax

With domestic cement dispatches dipping in July to 1.73Mt compared with 1.85Mt during same month last year, Pakistan producers witnessed a decline of 6.52 per cent. Furthermore, exports last month were 503,000t against 749,000t during July 2013, a reduction of 32.89 per cent. Total dispatches during July were only 2.23Mt compared to 2.6Mt during same month last year, a decline 14.12 per cent. Now the Pakistan Cement Manufacturers Association (APCMA) is requesting the government to consider changing its stance on the sector's overall tax burden.

Industry representatives have frequently approached the government to bring the industry within the normal sales tax regime, but an APCMA’s official said the authorities are yet to address the issues impacting the cement sector. Considering the cement dynamics, the government is now being lobbied to reconsider its decision and remove cement from the Third Schedule. This will help industry reduce prices which will help to accelerate construction activities across the country.

The recent federal budget 2014-15 has added to the worries of cement industry as the government has imposed one per cent duty on imported coal. Due to unavailability of gas, other industries have switched to coal and many others are also converting to coal, so this custom duty is to nullify the positive initiative of the government to use coal as an alternative energy source. The APCMA spokesperson pointed out that cement industry has spent millions of dollars in converting its plants from the expensive furnace oil to coal to reduce production costs. The 2014-15 budget also increased the excise duty on cement and the impact is around PKR2.5/bag (US$0.025/bag).

The impact on exports has been seen especially in the Afghanistan market where Paksitan's cement exports only reached 183,927t in July, considerably less than the July 2013 figure of 441,812t. The massive drop of over 58 per cent in exports to Afghanistan, according to industry experts, also indicates declining competitiveness in the global cement market where other regional players like Iran are making inroads.